Tag Archives: VOOM

The architectural flaw in the Cat’s plan to alleviate the problems of the unfunned

Surely all parents — or very young readers of this blog — will recall The Cat in the Hat Comes Back. It’s a marvelous tale of a feline visitor creating chaos as two young children are again questionably left alone by an apparently single parent. But the basic idea of the story is that the Cat in the Hat eats cake with pink icing in the bathtub, which results in a dreadful pink ring being left in the tub once the decision is made to empty the water. Upon the horrified pleas of the children that this tell tale sign of a poor decision on both their part — not acting more aggressively to prevent the cat from entering — and the cat’s — choosing a vulnerable household site in which to ingest potentially polluting pink icing — might anger their mother, the ever-confident Cat develops a series of fixes. They begin with the cat’s use of mother’s new dress to wipe off the ring. But, of course, this “fix” simply transfers the horror of the pink ring from the bathroom to the wardrobe.

Is the analogy to President Obama’s plan to permit people to keep their “substandard” health insurance for one more year not readily apparent?

Much of the remainder of the story is then spent detailing how each successive “fix” simply makes matters worse until there is complete (and delightful) chaos and the entire landscape is covered in the apparently undilutable horror of the original pink ring. The situation is salvaged only when the Cat pulls mysterious “VOOM” out of one of his nested hats and uses its power instantly to remove all traces of the pink icing and restore order to the snow-filled landscape in which the book is set.

As the most thoughtful parents and fiscally conservative children recognize, however, the apparent victory of the cat over chaos may be illusory, placating the mother for now in its restoration of a superficial benevolent equilibrium, but creating potentially grave systematic consequences later on. For no consideration has been given as to whether this use of apparently scarce VOOM — so small you can not see it — resulting from an obvious poor choice will deplete the VOOM supply and thereby prevent subsequent VOOM expenditures to deal with future problems. Might it not be better, the more clever readers recognize, for incentives to be established to deter future bathtub cake eating at all.

Does everyone then see it? The pink ring is the adverse selection problem created by assuming that private insurance could operate in a system without medical underwriting when only mild punitive measures would be taken for the failure to procure insurance and when many, however shortsightedly, would prefer to use their scarce resources other than for insurance that covers not only catastrophic medical expenses but also all sorts of medical services that they either might not need or might be able to acquire without resort to the complexities and expense of third party payment. The Cat is, of course, President Obama, trying assiduously and with false or foolish confidence to fix the situation. (Are the little sub-cats state insurance regulators only making matters worse?) The chaos is a metaphor for the problem that erupts when one attempts symptomatic cure of more fundamental and architectural design problems — frequently, these ill-thought-through attempts only make matters worse. (Pacifying the people whose insurance was cancelled but, to the extent such an effort actually succeeds, destabilizing the Exchange-based insurance pools that formed the core of the statutory reform.)

And VOOM, what is VOOM? VOOM is money. VOOM is “Risk Corridor” payments under section 1342 of the Act (42 U.S.C. 18062). Those payments are what it will take to “clean up the snow,” to restore any semblance of stability in the Exchange markets otherwise destabilized by removing a large segment of largely healthy individuals from their pools. But, again, I suspect, no consideration has been given as to the true bill for the underlying mistake, thinking that a system could be designed that, without requiring massive government subsidization, so defied economic laws which have, for a long time, told us that systems of private insurance in which underwriting is prohibited sooner or later — often sooner — contract due to adverse selection and, on occasion, fall into the black hole of a death spiral.

OK, OK. It’s a flawed analogy. I agree. And I do have some concerns that Dr. Seuss would not appreciate this political appropriation of one of his surely apolitical masterpieces. I ask for some indulgence and promise that far more scientific posts are forthcoming. But if Jonathan Gruber, one of the intellectual chiefs behind the Affordable Care Act, can write a politicized graphic novel extolling the virtues of the ACA, surely I may be indulged some literary criticism as a way of constructing an operating metaphor for the issues currently plaguing the same statute.